CHAPTER 1.02. Partnerships

• Jurisdiction: United States

1.02 Partnerships

[1] General Partnerships²³

A general partnership need not have a written partnership agreement.²⁴ Delaware general partnerships need not file or register as a condition to their existence,²⁵ but general partnerships that do file a statement of partnership existence must maintain a registered office and a registered agent in the State of Delaware.²⁶ General partnerships, like sole proprietorships operating under a fictitious name, should file a certificate in the Office of the Prothonotary, which is the clerk's office for the Superior Court, in the county in which the partnership is doing business.²⁷

A partnership must have at least two partners,²⁸ with each partner holding a partnership interest in the partnership.²⁹ A partnership interest has two components. The first component is an economic interest in the profits and losses of the partnership.³⁰ This interest is generally transferable by a partner.³¹ The other component consists of the voting and related rights in the partnership.³² A person only has voting and related management rights once admitted as a partner to the partnership.³³ These rights do not transfer to the assignee of a partnership interest, unless that assignee has also been admitted as a partner of the partnership.³⁴

Generally, a partnership is managed by the partners,³⁵ although the partnership agreement can provide for alternative structures of management.³⁶ In a general partnership, the partnership agreement takes precedence over the DRUPA, as the DRUPA allows for maximum freedom of contract.³⁷ Under the DRUPA, unless modified by the agreement, business matters in the ordinary course of the partnership business require a majority vote.³⁸ Business matters extending beyond the ordinary course of business require the unanimous vote of the partners.³⁹

All partners are jointly and severally liable for the obligations of the partnership unless otherwise agreed by the creditor or provided by law.⁴⁰ Further, the partnership is liable for the wrongful acts or omissions of the partners undertaken in the ordinary course of business.⁴¹ It is worth noting that partnership liabilities will first be satisfied from partnership property before the personal assets of individual partners are at risk.⁴²

[2] Limited Partnerships⁴³

A limited partnership is formed by the filing of a certificate of limited partnership in the office of the Secretary of State.⁴⁴ The certificate must include the name of the limited partnership, the name and address of the registered agent, the address of the registered office, and the name and address of each general partner.⁴⁵ In addition, the formation of a limited partnership requires a partnership agreement, although that need not be a written agreement.⁴⁶ Finally, in order to form a limited, rather than general, partnership, there must be at least one general partner and one limited partner who are different natural persons or entities.⁴⁷

A limited partnership is managed by one or more general partners.⁴⁸ If there is more than one general partner, each may be assigned different rights, obligations, and voting interests.⁴⁹ In order to maintain their limited liability, limited partners may not participate in the management of the limited partnership and its business.⁵⁰ Typically, the limited partners only vote on specific matters, as participating in the control of the business of the limited partnership can jeopardize the limited partner's limited liability...